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Shipping Firms Pass on Piracy Charges to Local Importers

Traders are rallying international support for the war against pirates off the coast of Somalia to stop the loss of billions of shillings through surging shipping costs.
Traders maintain that piracy is not a problem of Kenya's making, but international shipping lines are passing on the additional cost of sailing longer routes to avoid attacks and beefed up vessel security to consumers, drastically pushing up the cost of sea freight with negative impact on the region's economy.
Figures released on Tuesday by the Kenya Shippers Council (KSC) indicate that the region has been paying out Sh2billion every month to cover the cost of piracy over the last 18 months.
"The money is just the direct upward cost adjustment that international vessels have made to cover themselves from piracy but could be double if we include opportunity cost like lost market share as some orders may end up not reaching their destinations," said the KSC chief executive Gilbert Lang'at
He added: "A clear case in point is the recent hijacking of NV Delvina with 15,050 tonnes of wheat. The loss of production capacity and sale by millers who made the order, going by a conservative figure of $238 per tonne, gives a revenue loss $3,581,900."
Based on container throughput at Mombasa port, averaging 40,000 twenty foot equivalent units, KSC puts the increased monthly cost that directly results from piracy on imports (28,000 TEUs) at Sh1.8 billion ($23.8 million), while exports attract an additional Sh735 million ( $9.8 million) per month.
Among the new charges that shipping lines have introduced to ensure ransom activities do not drive them out of business include container handling charges which have risen by between 34 and 150 per cent compared to rates before October and bulk cargo freight rates, which have gone up between five and 150 per cent.

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